Morgan Stanley Reduces Price Target on Diageo (DEO) Following $750,000 Fine From COMESA

Diageo plc (NYSE:DEO) is one of Warren Buffett’s 10 Stock Picks with the Strongest Upside Potential. On October 15, Morgan Stanley reduced the price target on Diageo plc (NYSE:DEO) from 1,875 GBp to 1,740 GBp, keeping its Underweight rating on the stock.

Morgan Stanley has lowered the price target for Diageo’s stock trading on the London stock exchange, following the company’s agreement to pay a settlement of $750,000 in Africa. Back in 2021, the Common Market for Eastern and Southern Africa (COMESA) Competition Commission launched an investigation into several companies alongside Diageo. The investigation was conducted on the market allocation arrangements and territorial restrictions that Diageo and other companies were alleged to have.

According to COMESA, Diageo was involved in the practice of market allocation that was carried out through a distribution agreement with its third-party distributors. The investigation found that the U.K. beverage giant had restrictive clauses in production and distribution agreements in Seychelles and Uganda, which fixed product prices in the common market.

Diageo shares have dropped over 3% since Q2; however, analysts, on average, remain positive regarding DEO. BofA’s Andrea Pistacchi keeps a Buy rating on the stock. Pistacchi believes that the spirits industry has been declining 3-4% consistently this year, which is impacting the sales of Diageo in the U.S. However, the analyst sees Diageo’s valuation, along with expectations for a sequential improvement in the U.S. in the last quarter of the year, as a key resistance factor during these uncertain economic conditions.

As of October 21, Diageo plc’s (NYSE:DEO) average price target of $127.80, based on analysts’ estimates, implies an upside of approximately 30.47% from current levels.

Diageo plc (NYSE:DEO) is a U.K.-based premium drinks producer and distributor. The company offers beverage alcohol and operates various brands across spirits and beer categories globally.

While we acknowledge the potential of DEO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

Disclosure: None. This article is originally published at Insider Monkey.